Regulation of Prescription Drug Pricing

AMCP opposes government regulation of drug pricing because of the potential for unintended consequences and supports the elimination of barriers to competition to bring down the high cost of prescription drugs. The rising cost of prescription drugs is a serious challenge for the American health system, creating access and affordability challenges for patients. Of the more than 4,200 drug products that saw price increases between January 2022 and January 2023, almost half (46%) increased by more than the rate of inflation.¹ There is significant public interest in addressing drug prices; according to 2024 KFF polling, 82% of Americans said that the cost of prescription drugs is unreasonable.² The Inflation Reduction Act³ enabled the Department of Health and Human Services (HHS) to negotiate prices for certain drugs in Medicare, cap out-of-pocket spending for seniors, impose penalties on drug price increases that are greater than inflation, and limit patient cost sharing for insulin.⁴ As we examine the multifaceted landscape of prescription drug pricing, it is essential to recognize the complexities—from manufacturing costs and regulatory influences to market competition and insurance coverage—collectively shaping the affordability and accessibility of medications. 

Societal Impact of High Drug Prices 

In any discussion of prescription drug pricing, it is important to look at the societal consequences. KFF found that three in ten people struggle to afford their medications.⁵ While high drug prices affect the general population, racial disparities also play a role with the uninsured and low-income being disproportionately people of color.⁶ Often, individuals are forced to make difficult choices between essential medications and basic necessities. As costs rise, many find themselves struggling to afford treatments for chronic conditions, leading to skipped doses or delayed care that can ultimately jeopardize their health and financial stability.6 This pressure not only affects individual well-being but can also ripple through families and communities, exacerbating existing inequalities and straining healthcare resources.⁷ In addition to the affordability and access issues, high drug prices also contribute to higher premiums for insured patients and employers and an increased taxpayer burden to cover costs borne by government payers. Causes of High Drug Prices There is no singular cause of high drug prices because there are a number of factors that play into unit prices. The extension of brand exclusivity periods may delay the entry of less costly generic and biosimilar products into the market.⁸ High list prices may be set to account for manufacturers’ research and development costs. Other considerations for rising costs include formulary administration fees, price protection, purchasing discounts, government coverage mandates, the 340B program,⁹ and group purchasing organization fees, further reducing transparency into the causes of rising costs. Additionally, while patient assistance programs serve a vital role in increasing medication access for some patients, higher drug prices may be set to balance the discounts which could then lead to higher prices for insurers or government programs.¹⁰ Finally, regulatory pricing pressures due to the implementation of the IRA, the ACA, and other legislative and regulatory changes also impact drug prices. The healthcare system in the United States is highly regulated, including an intricate web of relationships between health plans and other payers, pharmacy benefit managers (PBMs), government agencies, wholesalers, retail pharmacies, and pharmaceutical manufacturers.¹¹ These relationships can influence pricing trends as the various players work to manage costs. For example, a rebate for a drug negotiated between a PBM and a manufacturer may inflate the list price for the drug. In fact, “on average, a $1 increase in rebates is associated with a $1.17 increase in list price.”¹² Although rebates allow negotiations to reduce net prices, they may also disincentivize the adoption and use of therapeutic equivalents such as biosimilars and generics.¹³ These various factors and relationships are highly complex and create a system where there is no easy solution to high drug prices. Potential Solutions AMCP understands the desire to seek a solution through government regulation of prices. However, this approach fails to take a holistic view of the complex mechanisms that lead to high prices and has the potential to lead to unintended consequences. Government regulation of prescription drug prices may counteract a managed care organization’s (MCO’s) ability to design an evidence-based, clinically sound, and cost-effective benefit. Regulated prices have the potential to cause cost‐shifting to other consumers and may inadvertently discourage appropriate drug prescribing, dispensing, and utilization. Ultimately, AMCP believes that policymakers should take reasonable steps to incentivize competition without implementing laws or regulations that may have an anti-competitive effect and therefore result in increased patient costs.¹⁴ Given AMCP’s unique composition of members spanning the healthcare environment, AMCP is a valuable resource for policymakers developing comprehensive strategies that account for the complexities of the pharmacy benefit landscape. One example of this comprehensive approach would be promoting competition by removing barriers to entry for generic¹⁵ and biosimilar products¹⁶. One analysis by RAND Corporation found that wider adoption of biosimilars could have reduced total US spending on biologic drugs by up to $124 billion by 2025.¹⁷ In therapeutic classes with multiple acceptable treatment alternatives, MCOs are also able to use formulary placement to move market share, giving the MCO leverage when negotiating price discounts with manufacturers or potentially lower overall costs. AMCP supports legislative and regulatory changes that would eliminate barriers to the entry into the marketplace and promote the development and use of safe, efficacious generic drugs and biosimilars, thereby helping to control rising drug costs. 

See also: 

AMCP Legislative and Regulatory Positions Approved by the AMCP Board of Directors, March 2025 

¹ Bosworth, A., Sheingold S., Finegold, K., Sayed, B.A., De Lew, N., Sommers, B.D. Changes in the List Prices of Prescription Drugs, 2017-2023. Available at https://aspe.hhs.gov/reports/changes-list-prices-prescription-drugs. 

² Sparks, G; Kirzinger, A; Montero, A; Valdes, I; and Hamel, L. Public Opinion on Prescription Drugs and Their Prices. KFF. Available at https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/ 

³ The Inflation Reduction Act. H.R. 5376. Available at 

⁴ Inflation Reduction Act and Medicare. CMS. Available at https://www.cms.gov/inflation-reduction-act-and-medicare 

⁵ Sparks, G; Kirzinger, A; Montero, A; Valdes, I; and Hamel, L. Public Opinion on Prescription Drugs and Their Prices. KFF. Available at https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/ 

⁶ Fusco N, Sils B, Graff JS, Kistler K, Ruiz K. Cost-sharing and adherence, clinical outcomes, health care utilization, and costs: a systematic literature review. J Managed Care Specialty Pharm. 2023;29(1):4–16. Available at https://www.jmcp.org/doi/10.18553/jmcp.2022.212707 Hager K, Emanuel E, Mozaffarian D. Employer-Sponsored Health Insurance Premium Cost Growth and Its Association With Earnings Inequality Among US Families. JAMA Netw Open. 2024;7(1):e2351644. doi:10.1001/jamanetworkopen.2023.51644. Available at https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2813927. See also Rising health insurance premiums linked to wage stagnation, study finds. Healthcare Dive. Available at https://www.healthcaredive.com/news/employer-sponsored-health-insurance-premium-growth-wage-stagnation-jama-network-open/704758/ 

⁸ American Academy of Actuaries. Issue Brief: Prescription Drug Spending in the U.S. Health Care System (2018). Available at https://www.actuary.org/content/prescription-drug-spending-us-health-care-system 

⁹ Thomas S, Schulman K. The unintended consequences of the 340B safety-net drug discount program. Health Serv Res. 2020 Apr;55(2):153-156. doi: 10.1111/1475-6773.13281. Epub 2020 Mar 1. PMID: 32114714; PMCID: PMC7080379. Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC7080379/ 

10 Wreschnig, L. A. Prescription Drug Discount Coupons and Patient Assistance Programs (PAPs). 2022. Available at: https://crsreports.congress.gov/product/pdf/R/R44264 

¹¹ Baker, D.E. High Drug Prices: So Who Is to Blame? Hosp Pharm. 2017 Jan;52(1):5-6. doi: 10.1310/hpj5201-5. PMID: 28179734; PMCID: PMC5278914. Available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5278914/ 

¹² Sood, N; Ribero, R; Ryan, M; and Van Nuys, K. The Association Between Drug Rebates and List Prices. (2020). USC Leonard D. Schaeffer Center for Health Policy & Economics. Available at https://healthpolicy.usc.edu/research/the-association-between-drug-rebates-and-list-prices/ 

¹³ Arad, N; Staton, E; Hamilton Lopez, M; Goriola, S; Higgins, A; McClellan, M; and Richman, B. Realizing the Benefits of Biosimilars: Overcoming Rebate Walls (2022). Available at https://healthpolicy.duke.edu/sites/default/files/2022-03/Biosimilars%20-%20Overcoming%20Rebate%20Walls.pdf. 

¹⁴ Competitive Marketplace. AMCP Legislative and Regulatory Position Statement (2022). Available at https://www.amcp.org/legislative-regulatory-position/competitive-marketplace 

¹⁵ Mulcahy A. Biosimilar Drugs Could Generate $38.4 Billion in Savings over Five Years. Rand Corporation. January 10, 2022. Available at https://www.rand.org/news/press/2022/01/10.html 

¹⁶ Generic Drugs. AMCP Legislative and Regulatory Position Statement (2023). Available at https://www.amcp.org/legislative-regulatory-position/generic-drugs 

¹⁷ Biosimilar Drug Therapies. AMCP Legislative and Regulatory Position Statement (2023). Available at https://www.amcp.org/legislative-regulatory-position/biosimilar-drug-therapies